Theories of Heterogeneous Firms and Trade

38 Pages Posted: 6 Dec 2010 Last revised: 3 Apr 2023

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Date Written: December 2010

Abstract

This paper reviews the recent theoretical literature on heterogeneous firms and trade, which emphasizes firm selection into international markets and reallocations of resources across firms. We discuss the empirical challenges that motivated this research and its relationship to traditional trade theories. We examine the implications of firm heterogeneity for comparative advantage, market size, aggregate trade, the welfare gains from trade, and the relationship between trade and income distribution. While a number of studies examine the endogenous response of firm productivity to trade liberalization, modeling internal firm organization and the origins of firm heterogeneity remain interesting areas of ongoing research.

Suggested Citation

Redding, Stephen J., Theories of Heterogeneous Firms and Trade (December 2010). NBER Working Paper No. w16562, Available at SSRN: https://ssrn.com/abstract=1719923

Stephen J. Redding (Contact Author)

Princeton University ( email )

Princeton, NJ 08544-1021
United States

HOME PAGE: http://www.princeton.edu/~reddings/

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